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About this blog: I grew up in Los Angeles and moved to the area in 1963 when I started graduate school at Stanford. Nancy and I were married in 1977 and we lived for nearly 30 years in the Duveneck school area. Our children went to Paly. We moved ... (More)

About this blog: I grew up in Los Angeles and moved to the area in 1963 when I started graduate school at Stanford. Nancy and I were married in 1977 and we lived for nearly 30 years in the Duveneck school area. Our children went to Paly. We moved downtown in 2006 and enjoy being able to walk to activities. I do not drive and being downtown where I work and close to the CalTrain station and downtown amenities makes my life more independent. I have worked all my life as an economist focusing on the California economy. My work centers around two main activities. The first is helping regional planning agencies such as ABAG understand their long-term growth outlook. I do this for several regional planning agencies in northern, southern and central coast California. My other main activity is studying workforce trends and policy implications both as a professional and as a volunteer member of the NOVA (Silicon Valley) and state workforce boards. The title of the blog is Invest and Innovate and that is what I believe is the imperative for our local area, region, state and nation. That includes investing in people, in infrastructure and in making our communities great places to live and work. I served on the recent Palo Alto Infrastructure Commission. I also believe that our local and state economy benefits from being a welcoming community, which mostly we are a leader in, for people of all religions, sexual preferences and places of birth. (Hide)

I Will Vote No on Prop 10

Uploaded: Oct 5, 2018

Some residents locally and throughout the region have experienced very large rent increases in recent years. These increases often create emotional and financial hardship. Still, I think that Prop 10 (the repeal of current restrictions on rent control) is a bad solution and will be voting no on Prop 10 in November.

Three are three major reasons I oppose Prop 10.

The first reason is that Prop 10 does not add to the stock of rental housing and will probably have the opposite effect. The second reason is that Prop 10 does not reduce rents and will probably have the opposite effect.

The third reason, which I hope readers will comment on, is the ethical and implementation challenges of deciding whether to impose rent control on single family homes and small apartment complexes.

The incentive to build or retain rental housing will be diminished if Prop 10 is passed. Some prospective developers of rental housing may choose not to build or convert rental properties to condos if Prop 10 is passed depending on what is done about rent control for homes. I could see some owners who are thinking about adding ADUs reconsider if rent control is imposed. In no case do I see rental housing being increased as a result of Prop 10.

Rent control limits the future increases in rent. It does not roll back rents that are already out of reach for many. And it is likely that Prop 10 will put upward pressure on rents. This will happen if rent control takes rental units off the market through conversion to condos or discourages some new construction. Rents are high in the first place as a result of a shortage of rental housing so adding to the shortage is not a way reduce rent pressures.

And then there are the dilemmas poised by imposing rent control on single family homes and condos and small apartment complexes. On the one hand, why should renters in homes not be protected while renters in large complexes are protected? Many people do rent homes, particularly when groups of people get together to share the rent. So I see no rationale for creating two separate groups of renters depending on the type of structure they rent.

But the implementation challenges of monitoring rent increases in hundreds or thousands of small rental units seem difficult and intrusive and could by themselves discourage owners from renting. Is this something that the residents of Bay Area communities want to add to the workload of already stressed city staffs?

I do favor additional rental protections and policies to reduce the cost of building rental housing and will discuss these in a future column.

Wow. Even very liberal economists recognize that rent control is a bad public policy solution. Rent control is an arbitrary price control and high rents are a result of a relative scarcity problem... more money chasing fewer available rental opportunities leads to higher rents overall. Price controls have NEVER solved a scarcity problem. If bread is scarce and government decrees you shall not charge more than $1/loaf ... you end up with empty shelves time and time again. Anyone who thinks that making rental property a less attractive investment and forcing landlords to deal with additional layers of government red-tape is going to lead to more investment in maintaining and developing rental property is delusional. I own a couple single family homes and charge rents to cover operating and carrying expenses, not to make huge profits. It will be better to just leave them vacant than to rent them out if they are subject to rent control making it very hard to get tenants out without paying thousands of dollars "relocation assistance" and walking through a minefield of potential legal traps. As an added bonus I would no longer have to deal with phone calls at all hours of the day saying the water heater is out, kitchen sink is leaking, etc.

As a small potatoes landlord, rent control imposition would probably make me throw in the towel and exit the market ... leaving it to the big boys with high profit motive and deep legal teams able to manage and work around rent control. A lot of small landlords with single family homes or perhaps one duplex likely would do the same. The meager cash flow generated through rents wouldn't be worth the hassle and risks.

Solution is both simple, obvious and extremely challenging... increase supply relative to demand. The next economic downturn hitting the tech industry will be your best tonic. Rent control solves nothing... it increases demand and reduces supply, leads to dilapidated living conditions, and people being locked into place fearing to move with landlords desperate to get them to move. These impacts are obvious and documented in studies by people who look at it from a practical perspective without the rose colored eyeglasses.

Posted by Curmudgeon,
a resident of Downtown North,
on Oct 5, 2018 at 8:01 pm

Well, what to do about greedy landlords raising rent arbitrarily and the obvious social and economic problems that causes>

"Even very liberal economists recognize that rent control is a ..."

The existence of "liberal" and "conservative" economists belies any pretense of economics to being a science. Economists should be regarded as political pundits who dress up their opinions with dollar signs and decimal points, not as experts possessing useful objective knowledge. OK, Steve, you will now do refutation by deletion.

Posted by stephen levy,
a resident of University South,
on Oct 5, 2018 at 8:54 pmstephen levy is a registered user.

@ curmudgeon

you and others are pretty free with the greedy word.

so please explain in homeowner landlords are greedy. How about people who sell there house for 20 times what they paid for it? Are they greedy? What about a property owner whose only income is a small apartment building and he/she sees that rents are rising? Are they greedy if they put their rents up to the market value?

And would you impose rent control on hones, condos< ADUs and small apartments and if so how would you monitor and implement such programs?

Posted by Anon,
a resident of Another Palo Alto neighborhood,
on Oct 5, 2018 at 9:42 pm

Posted by Curmudgeon, a resident of Downtown North,

>> Well, what to do about greedy landlords raising rent arbitrarily and the obvious social and economic problems that causes>

When I was young, I got burned by some greedy landlords, and, benefited from the generosity of some very nice landlords. Recently, a relative got burned by a greedy landlord. When every dollar counts, it really hurts, but, I don't think there is a simple policy-based solution for a problem that goes back many millennia.

>> > "Even very liberal economists recognize that rent control is a ..."

>> The existence of "liberal" and "conservative" economists belies any pretense of economics to being a science.

Only an ignorant economist would imagine that economics has a foundation as solid as, say, thermodynamics. However, even simple mathematical models can offer insight into whether or not markets can exhibit stable prices, and how "common sense" can go wrong.

>> Economists should be regarded as political pundits who dress up their opinions with dollar signs and decimal points, not as experts possessing useful objective knowledge.

I don't expect anyone on the far-right or far-left to understand what I am saying, but, in reality, -liberal- economists are usually correct. There aren't many far left economists around any more, but, far right economists have a religious belief in something called "the market". Far right economists believe that "the market" is always right, even when it is wrong-- that is, even when it stops acting like a free market because of the effect of monopolies.

I'm a pragmatic liberal. If someone could show me where and how rent control worked really well, I would be in favor of it. So far, I haven't seen where rent control is working well.

Posted by mauricio,
a resident of Embarcadero Oaks/Leland,
on Oct 6, 2018 at 6:04 ammauricio is a registered user.

In a truly free market economy, rent control might not be a good idea, but we don't live in anything remotely resembling a free market, we live in an oligarchy dominated crony capitalism. Landlord are basically a monopoly. When they raise their rent by 25-30 percent or more every year, they can literally run-in families and individual lives and cause heavy societal damage. Profit at all cost is not a divine right. Even landlords have obligations to their society at large. Price gauging should not be celebrated.

In my opinion opposition to 10 is not only wrong, it is short sighted and also bad economics. I will vote an enthusiastic YES.

BTW, Dan his right, there are no far left economist in the US. What the right wing considers far left ecomonists would be considered moderate. middle of the road economists in Western Europe. The perception is all skewed because our country has made such a sharp turn to the extreme right.

Posted by Class Act,
a resident of Green Acres,
on Oct 6, 2018 at 7:12 am

Southgate's "Conservative Solutions" was, imho, mocking the poster 'Dan', not the blogger, as I read it.

The deleted portion was a mocking reference to questionable "Even very liberal economists recognize" as I recall reading it.

And Dan's "solutions" to skyrocketing rents include an economic downturn?

Again, forgive me for working off memory, but I recall post dotcom bubble having huge demands on rental units with skyrocketing rents - demand so high I recall seeing LINES when new units were open to be viewed (certainly in Menlo Park, Summer 2000.)

The foreclosure crisis in 2008 similarly saw rising rents - so many homeowners were booted and had to find rentals - an absurd spike in demand.

Mr. Levy: suggestions on where I can find data from your universe to support that? (thanks)

Posted by stephen levy,
a resident of University South,
on Oct 6, 2018 at 7:55 amstephen levy is a registered user.

To all the vote yes bloggers

You have done a great job of avoiding my tough questions by ignoring that many renters live in places where the "landlord" is a single family homeowner or small landlord where this us their only source of income. Like all the apartment owners who came in Palo Alto to testify last month.

You can do better so please take on the tough questions and explain how you would handle rent control in these situations and whether you consider homeowners who sell greedy because they sell at market prices.

Posted by stephen levy,
a resident of University South,
on Oct 6, 2018 at 8:05 amstephen levy is a registered user.

@ class act

I do not have rental data for that time period

but there is data on home prices.

They stayed level after the dot.com bust, which was in 2001-2003 not mid 2000.

And there was massive out migration of immigrants living in apartments in the county so it is very doubtful that either rents were rising or there were lines in 2001, 2002 and 2003. the period you mentioned mid 2000 was at the height of the boom in jobs and in migration.

On the other hand they dropped from $865,000 median in Santa Clara County in April 2007 to $465,000 in April 2009.

And my downtown office rent dropped from $8/ sq ft in 2000 to $5/ sq ft after the dot.com crash.

Crashes are not my solution to housing prices but they do work to lower prices and rents.

Posted by stephen levy,
a resident of University South,
on Oct 6, 2018 at 9:39 amstephen levy is a registered user.

Hi Class Act

If you would like me to answer your questions, please answer mine.

And perhaps other readers can share there experience of where they rent.

I will tell you that have of the condos where I live downtown are rentals. And one of the frequent posters here and on FB rents in a home where increases have been very large and the family has been on the BMR wait list for 8 years. So one of the solutions is to allow and build a lot more BMR units.

thanks for your respectful posts but this is supposed to be a conversation where both parties answer each other's questions when they can.

The issues about whether homeowners and small rental units should be included and how that will work are very relevant as Prop 10 moves beyond current rent control law (it is legal now but limited in scope) to allow much broader controls on who is subject to rent control and what happens when a tenant moves out.

And my post is about a statewide ballot initiative not just focused on PA.

In response to your earlier question the county median price data is from car.org scroll down and look at data and statistics for historical median price data.

the migration data is dof.ca.gov in the demographics section look for file E-6

Posted by Class Act,
a resident of Embarcadero Oaks/Leland,
on Oct 6, 2018 at 10:14 am

thanks

As is obvious, I don't have the level of expertise, experience or even access to the data I'd like as I attempt to formulate an answer that I'd be satisfied with... (I'd like to move past the "I feel..." type of response, and the anecdotal examples I gave.) Allow me to work on it, please.

The cost and migration data don't really substitute for for actual rent data though, as you clearly understand. I'm not sure how BMR is relevant as aren't they typically part of multi-unit properties?

Last: appreciate the respect. Perhaps some of your fair style will rub off on another EM blogger who simply deletes posts raising points he is apparently unable to address to his satisfaction.

Posted by george drysdale,
a resident of another community,
on Oct 6, 2018 at 11:56 am

Good going Steve. Rent controls are pure poison. Price caps create shortages. What social studies teachers now have going for the is the internet, go remind yourselves about what you should have learned as a teenager. The solution? There are no solutions, just trade-offs. The alternative: 30 year bonds to build "affordable housing." Everybody gets their rent or house payment (a form of rent) raised for the lucky ten percent who win the lottery. Economics the dismal science.
George Drysdale land economist and social studies teacher (same thing, sort of).

Posted by Jeremy Hoffman,
a resident of Mountain View,
on Oct 6, 2018 at 12:17 pm

mauricio -- Landlords have a monopoly on housing only because our governments have made it illegal to build more housing! If we legalize housing, landlord's monopoly is shattered by new competition.

Everyone complains about speculators and foreign investors. Those unscrupulous speculators are counting on the monopoly on the housing supply. You know how we can serve the speculators their just desserts? Legalize housing!

Posted by Gale Johnson,
a resident of Adobe-Meadow,
on Oct 6, 2018 at 1:23 pmGale Johnson is a registered user.

I have no skin in the game so I remain undecided currently.

"I will tell you that have of the condos where I live downtown are rentals. And one of the frequent posters here and on FB rents in a home where increases have been very large and the family has been on the BMR wait list for 8 years. So one of the solutions is to allow and build a lot more BMR units."

I assume Steve meant 'half' and that the family is applying under Section 8. Here's what bothers me about the term BMR. Some people might erroneously support housing that was advertised as affordable BMR housing, thinking it was for the Section 8 applicants. The staunch housing advocates on CC don't, and I suspect would never try to clarify the distinction between Section 8 folks and the BMR folks that couldn't qualify under Section 8. It's the second group they are looking out after primarily, with projects that give relief in several areas to developers. The VTA site is one example.

And now just to muddy the waters a little more, throw in the term AMI (Area Median Income). Projects (Work Force) are being sold/approved by advertising they are for people earning no more than 80% of AMI. Are you still puzzled? Confused? How does BMR relate to AMI? Well, MR is market rate, as high as it gets based on supply and demand, and BMR is anything below that. And yes, housing for 80% AMI income folks fits into that definition.

Posted by Gale Johnson,
a resident of Adobe-Meadow,
on Oct 6, 2018 at 1:48 pmGale Johnson is a registered user.

Oops, my mistake. Ignore what I said about the VTA project in my previous post. I had projects mixed up, but much of what I said still applies to many proposed projects in PA. And 140% of AMI is 40% higher than AMI...duh...but still less than MR...also 'duh'!! And also much higher than Section 8 applicants' incomes. Housing advocates will continue to fiddle with numbers, and that's okay, as long as Palo Alto doesn't burn down. lol!

Posted by stephen levy,
a resident of University South,
on Oct 6, 2018 at 1:49 pmstephen levy is a registered user.

Gale Johnson,

I was referring to the Palo Alto Housing wait list. The quote below is from their website--pah.community. All on the wait list are subject to the county area median income limitations for eligibility.

BMR housing has many funding sources and is not just Section 8 HUD housing as you can see on the PAH website.

The VTA site discussion acknowledges that many people who are not eligible for subsidized BMR housing are still affordability challenged.

"PAHC Housing Services, LLC administers the City of Palo Alto's Below Market Rate (BMR) Housing Rental Program, a program that provides rental apartments in Palo Alto for low and moderate-income households. BMR rental units are leased at rates below prevailing market rents and rent increases are subject to certain limitations. BMR renters are selected from a Waiting List and must meet special income and other eligibility requirements."

Posted by mauricio,
a resident of Embarcadero Oaks/Leland,
on Oct 6, 2018 at 1:50 pmmauricio is a registered user.

Home owners are not comparable to renters, it's a false dichotomy. People who can afford to buy a home, especially in desirable areas, can afford to rent, quite easily in most cases. Renters can't afford to buy homes, and perpetual large increases in their rent are devastating. They don't have another option, therefore large increases are sometime life shattering. Just because one can get away with something doesn't mean they should, or should be allowed to if the societal damage is too devastating.

In a crony capitalism system such as hours, reckless rent increases should be dealt with like reckless utility increases, they should be regulated. If the logic of the neo liberal economists on this blog was adopted everywhere, at least half of the renters who leave in manhattan wouldn't be able to reside there, and only the very wealthy would live in NYC.

Landlords deserve to make a profit, but who said they should get away, at least in desirable areas with annual increases on 25-30-40 percent?

Posted by stephen levy,
a resident of University South,
on Oct 6, 2018 at 2:03 pmstephen levy is a registered user.

Mauricio,

I am talking about homeowners who rent their homes (do you) and are landlords as much as owners of apartment buildings.

If you focus on the fate of their renters you will see the distinction.

Take three, four or five people scraping together the funds to rent a house.

If there is expanded rent control under Prop 10, why should these renters be exempt from rent control.

And if you do impose rent control on individual ownership units such as homes or the condos in my building or even on small apartments, how in the world are you going to implement and enforce compliance?

And if renters get controls, why not buyers? Why shouldn't we impose controls on how much you can sell your house for? House prices in the region have gone up as much or more than rents.

And if homeowners should be allowed to profit from market forces caused by housing under supply, whether as sellers or landlords, why shouldn't other landlords be able to charge market rates?

It is easy to demonize landlords in the abstract but how about homeowner landlords or an owner with one building -- all of his or her income dependent on it?

Posted by myr,
a resident of Another Mountain View Neighborhood,
on Oct 6, 2018 at 3:05 pm

“I have never understood why it is "greed" to want to keep the money you have earned but not greed to want to take somebody else's money."
Thomas Sowell

Rent Control does not build new inventory, nor will prop 10. One need only look to SF and NY to understand the long term effects of rent control. Prop 10 will only further exacerbate the housing shortage.

I want to see more housing built even if it is affordable or not because more (housing) is better and better is good.

Posted by WheelinDealin,
a resident of another community,
on Oct 6, 2018 at 10:21 pm

Rent control is basically empowering the local government to dictate what you can and can not do with your own private property. One set of individuals forced to subsidize another. Why would anyone vote for more government control? Rent control is just another step closer so socialism. Liberal and conservative economists agree that rent control reduces supply and therefore increases demand and competition for available rental units.

Having lived in LA rent control units, I am of the opinion that rent control creates slums with entrenched tenants living in sub-standard living conditions.

Posted by Kevin,
a resident of Portola Valley: Los Trancos Woods/Vista Verde,
on Oct 7, 2018 at 12:15 pmKevin is a registered user.

I can't see rent control as a standalone solution, and in fact it actually might limit construction or repurposing of new rental housing. Any "housing cost solution", that doesn't include incentives and allowances for building additional housing stock, especially near transit and jobs, is a non-starter from an economics perspective. Easy to vote NO on this one.

Posted by Anon,
a resident of Another Palo Alto neighborhood,
on Oct 7, 2018 at 12:16 pm

Anon: >> I'm a pragmatic liberal. If someone could show me where and how rent control worked really well, I would be in favor of it. So far, I haven't seen where rent control is working well.

I'm still looking for that existence proof from a rent-control advocate showing a city somewhere where rent control worked well or is working well. I can't vote for rent control just to somehow "get even" with somebody or "send a message" or whatever. To be for rent control, I want to see it working somewhere. Where is it working?

Posted by stephen levy,
a resident of University South,
on Oct 7, 2018 at 1:04 pmstephen levy is a registered user.

to mike rose

Yes Prop 10 calls for repeal of Costa Hawkins but it allows much more stringent rent control measures if cities choose to adopt them.

My blog is about those expanded powers and the difficult questions they raise.

The history of limited rent control under Costa Hawkins does not give definitive answers to the questions i raise in the blog.

there are posters who support Prop 10 in this thread and those who do not.

Please focus on either rent control as an abstract concept or the new rules under Prop 10, which is why I keep asking posters to whom they would apply these new powers and if they wish to exempt homeowners or anyone else from the provisions of rent control, why and why not.

Why should people who live in space they rent from homeowners or small apartment owners not get rent control protections if you think rent control is a good idea and if you include them under rent control, how are you going to im0plement and enforce that?

Posted by mike rose,
a resident of another community,
on Oct 7, 2018 at 1:23 pmmike rose is a registered user.

TBM,

portion deleted

You claim to have some proof that CH caused the current crisis, which is silly, you cannot substantiate these false claims.
When did the developers promise to provide affordable housing when CH was passed, as you again falsely claim?
Please provide proof, not just empty and tired rethoric, typical to radical tenants' activists.

The debate over rent control has long been a hotly contested issue in California. In Berkeley, a city with a relatively long history of rent control ordinances, the process started in 1976. In June of this year, the Supreme Court of California unanimously ruled that rent control ordinances are within the jurisdiction of local government in Birkenfeld v. City of Berkeley (SCOCAL). Two years later, the city of Berkeley introduced its first regulations on rent, calling for a reduction at the start of the new year. The next major milestone was in June 1980, when the Rent Stabilization and Eviction For Good Cause Ordinance was passed, establishing the basis for future provisions of rent control in the city. These provisions include the establishment of a rent ceiling, controls on evictions, and allowing the discretion of rent increases to be determined by the nine-member Rent Board (History 1995).

The provisions of the Costa-Hawkins Act are not extensive, but impactful. The Act created two key exemptions to already established rent controls. First, rental housing constructed after February 1, 1995, the year in which the law was passed by California legislature, is automatically exempt from any local rent control ordinances. This includes housing units previously “exempt from the residential rent control ordinance of a public entity on or before February 1, 1995, pursuant to a local exemption." The second exemption includes housing units that qualify as single-family homes and condominiums. These forms of housing, along with other forms of property that are “separate from the title of any other dwelling unit," are exempt from any municipal rent control regulations (Costa-Hawkins 1995). These exemptions constituted the majority of the impact resulting from the enactment of the law, as over a dozen cities throughout California had active municipal rent control at the time of its passing.

That being said, the second main provision of Costa-Hawkins had more direct consequences on the city of Berkeley. Section 1954.53 prohibited the concept of vacancy control, also known as “strict" rent control. Before the passing of Costa-Hawkins, this “strict" form of rent control prevented the owners of residential units from increasing rent after a vacancy or change of tenants in the unit. Only five cities had adopted this more extreme policy of rent control, including Berkeley. After the Costa-Hawkins Act went into effect, owners were allowed to charge market price for their unit after a tenant voluntarily leaves, so long as the unit passes safety inspections and the owner renews the necessary governmental contracts (Costa-Hawkins 1995).

The intent of the Act was to roll back the extensive rent control that had sprung up throughout California in the previous two decades. As stated in the bill analysis, the “legislative intent [is] to streamline and improve state housing policy by repealing obsolete, outmoded, and inoperative programs and statutes" (Holloway 1995). PROPONENTS OF THE BILL SAW THESE RENT CONTROL ORDINANCES AS HAVING AN OVERREACHING IMPACT ON THE FREE MARKET, DISCOURAGING NEW HOUSING DEVELOPMENTS AND CAUSING OWNERS TO SELL THEIR PROPERTIES. According to census data, the number of “renter-occupied housing units" decreased between 1980 and 1990 in Berkeley, suggesting that rent control had a net negative impact on the availability of affordable housing in the city (Holloway 1995). BY PASSING THIS LAW, PROPONENTS HOPED TO SHIFT THE HOUSING MARKET BACK TOWARDS MARKET EQUILIBRIUM, THEREFORE DECREASING MISALLOCATION AMONG TENANTS AND IMPROVING THE AVAILABILITY OF AFFORDABLE HOUSING AS A WHOLE. OPPONENTS OF THE BILL, HOWEVER, SUGGESTED ITS PASSING WOULD RESULT IN AN IMMENSE RISE IN RENT COSTS, WHICH WOULD IN TURN REDUCE AFFORDABLE HOUSING OPTIONS.

...

The main purpose of the Costa-Hawkins Act is to reverse and reduce the onslaught of rent control throughout California WHILE KEEPING HOUSING AFFORDABLE. PROPONENTS OF THE BILL HOPED THAT THE ENACTMENT WOULD PROMPT NEW CONSTRUCTION OF RENTAL UNITS, WHILE CONCURRENTLY SHIFTING THE HOUSING MARKET TOWARDS EQUILIBRIUM AND ELIMINATING THE WIDESPREAD MISALLOCATION. IN RECENT YEARS, HOWEVER, BERKELEY HAS BEEN HIT WITH UNPRECEDENTED INCREASES IN RENT PRICES, WITH THE MEDIAN COST PEAKING AT $3,772 IN FEBRUARY OF THIS YEAR. This number is more than double the national average of $1,400, and represents almost a 100% increase since 2011. Much of this increase can be attributed to 2015, which saw rates jump over 32% from 2014 (Berkeleyside). LOW-INCOME FAMILIES AND INDIVIDUALS HAVE PARTICULARLY FELT THE BURDEN OF HIGH RENT, WITH THE DAILY CALIFORNIAN REPORTING THAT BERKELEY “PRODUCED ONLY 14 PERCENT OF THE HOUSING PRODUCTION GOAL SET BY THE ASSOCIATION OF BAY AREA GOVERNMENTS FOR MODERATE, LOW OR VERY LOW-INCOME UNITS" FROM 2007 TO 2014 (KOSHINO). BERKELEY HAS ALSO STRUGGLED WITH THE DEVELOPMENT OF NEW AFFORDABLE HOUSING, AS MENTIONED ABOVE, POSSIBLY DUE TO THE LACK OF RENT CONTROL. BASED ON THIS EVIDENCE, IT SEEMS THAT THE COSTA-HAWKINS ACT HASN'T HAD AS POSITIVE AN IMPACT AS PLANNED, GIVING MERIT TO PAST CALLS OF REPEAL OR REFORMATION."

Posted by The Business Man,
a resident of Another Mountain View Neighborhood,
on Oct 7, 2018 at 6:53 pmThe Business Man is a registered user.

I AM FOR TOTAL REPEAL

I have 2 business degrees and studied economics at Tom Means SJSU College of Business.

The industry was given a chance to reform itself under Costa Hawkins. It took advantage of the market shortages, cannot prove that it was doing anything to provide affordable housing, and reaped significantly artificially high profit margins. The industry is simply going to have to finally pay the price of that short vision.

Posted by mike rose,
a resident of another community,
on Oct 8, 2018 at 7:11 ammike rose is a registered user.

I absolutely disagree with The Business Man.
No industry, including apartment industry should be forced to be in a welfare business.
This is a role of a government or society as a whole who should bear the burden.

The government building regulations, NIMBY oppositions, zoning restrictions, extremely high cost of labor and materials in California virtually make the construction of affordable housing impossible for private developers.

On the other hand, the same local governments, hungry for tax revenues, allow businesses to grow out of control, creating thousands of jobs.

Obviously this creates housin imbalance, particularly affordable housing.
When the demand for housing exceeds supply, prices rise, like in every other business.

Instead of putting in hard work to eliminate this imbalance, the same governments, this time with the loud assistance of tenants activists, choose the easy and quick way.
They stigmatize the landlords as greedy and blame them for the whole situation.
This is the logic behind The Business Man arguments.

Posted by Anon,
a resident of Another Palo Alto neighborhood,
on Oct 8, 2018 at 11:19 am

Posted by The Business Man, a resident of Another Mountain View Neighborhood,

>> The industry is simply going to have to finally pay the price of that short vision.

This is known as "cutting off your nose to spite your face". Please don't do it. Don't vote for something or someone to "send a message". What if the something or someone you voted for wins?

Posted by mike rose, a resident of another community,

>> I absolutely disagree with The Business Man.

I disagree with both of you, for different reasons.

>> No industry, including apartment industry should be forced to be in a welfare business.

Regulations are not "welfare". If regulations have the desired effect, they are better than welfare.

>> This is a role of a government or society as a whole who should bear the burden.

This argues in favor of, for example, public housing projects. But, over many years, public housing projects have failed dramatically. Spectacularly even. The building part is the easy part. Pruitt-Igoe is the poster-child: Web Link As time went on, it went into a maintenance/crime death spiral. Let's look at what public projects have actually worked over the years: the space race, large dams, large bridges, generally big projects that require heavy top-down project management. What hasn't worked? Housing for poor people-- requires maintenance, security, and ongoing service that are always underfunded. Sometimes bridge -maintenance-. (e.g. the recent bridge failure in Italy)-- ongoing maintenance funded by taxes and/or tolls that no one wants to pay and that people complain constantly about, and that government has a difficult time doing efficiently.

Housing has proven many, many times to be a poor fit for what government does well. Let's keep housing in the private sector as much as possible.

Posted by mike rose,
a resident of another community,
on Oct 8, 2018 at 12:01 pmmike rose is a registered user.

Anon,
I have to disagree. Whatever definition of "welfare" I looked up it basically comes down to this definition:
"Financial support given to the people in need"
It would be hard to argue that rent control is not precisely that.
It is simply a price control scheme.
Money are taken from landlords and transferred to the tenants( the difference between the market and controlled rent). Additionally, money is taken from landlords in the form of the rent board fees and so called " relocation assistance" which benefit tenants ONLY.
This is another aspect of "financial support" which landlords are FORCED to provide.
So, calling it welfare, in my opinion, is proper.

Posted by The Business Man,
a resident of Another Mountain View Neighborhood,
on Oct 8, 2018 at 12:12 pmThe Business Man is a registered user.

In response to mike rose who said:

“No industry, including apartment industry should be forced to be in a welfare business.

This is a role of a government or society as a whole who should bear the burden."

As stated by another “market regulations" are a “integral part of the market" So that statement is simply not correct you said:

“The government building regulations, NIMBY oppositions, zoning restrictions, extremely high cost of labor and materials in California virtually make the construction of affordable housing impossible for private developers."

Show PROOF by providing real numbers by independent analysts. Not reports provided by the CAA, CAR, Developers, or Private Investors, OR ANY FUNDED BY THEM. You said:

“On the other hand, the same local governments, hungry for tax revenues, allow businesses to grow out of control, creating thousands of jobs."

That does no document or prove that local governments are the cause of the problem. You need to provide INDEPENDEMT PROOF to support this claim. You said:

When the demand for housing exceeds supply, prices rise, like in every other business."

You have not PROVEN this “obvious" claim. This is the typical response when industries are confronted with a mess they made themselves. You said:

“Instead of putting in hard work to eliminate this imbalance, the same governments, this time with the loud assistance of tenants activists, choose the easy and quick way."

The Costa Hawkins Act WAS the HARD work the government did. You have obviously ignored the information that the industry wanted the government OUT OF THE HOUSING MARKET. Thus convinced the state to pass Costa Hawkins. The PRIVATE SECTOR SAID IT WILL BE MORE EFFICIENT AND CORRECT THE PROBLEM. THE GOVERNMENT GOT OUT OF THE WAY. IT FAILED MISERABLY. You said:

“They stigmatize the landlords as greedy and blame them for the whole situation."

I did not say they were “greedy", I said they took advantage of the market shortage. That is NOT the same. You said:

“This is the logic behind The Business Man arguments."

(SL:portion deleted as repetitive to his earlier posts)

What statement did I make saying they were “greedy". This is my logic and you refuse to even acknowledge it.

Posted by The Business Man,
a resident of Another Mountain View Neighborhood,
on Oct 8, 2018 at 1:33 pmThe Business Man is a registered user.

In response to mike rose you said:

“I have to disagree. Whatever definition of "welfare" I looked up it basically comes down to this definition:

"Financial support given to the people in need"

It would be hard to argue that rent control is not precisely that.

It is simply a price control scheme."

YES IT IS A PRICE CONTROL SCHEME, NOTHING MORE IT IS NOT WELFARE. You said:

“Money are taken from landlords and transferred to the tenants( the difference between the market and controlled rent). Additionally, money is taken from landlords in the form of the rent board fees and so called " relocation assistance" which benefit tenants ONLY."

MONEY IS NOT TAKEN FROM LANDLORDS. RENT LAWFULLY CHARGED IS JUST THAT. RENT BOARD FEES ARE NORMAL BUSINESS EXPENSES NOTHING MORE. IF A LANDLORD WANTS TO REMOVE A TENANT UNDER OWNER MOVE IN, REMODELING, DEMOLITION, OR ANY OTHER ACTS NOT DUE TO THE CONDUCT OF THE TENANT IS NORMAL BUSINESS EXPENSES. NO MONEY IS TAKEN FROM LANDLORDS EXCEPT WHERE IT IS UNLAWFULLY CHARGED, OR THE LANDLORD CAUSES EXPENSE TO TENANTS WHEN TENANTS DID NOTHING TO WARRANT AN EVICTION. You said:

“This is another aspect of "financial support" which landlords are FORCED to provide."

NO IT IS NOT FINANCIAL SUPPORT IF LANDLORDS WANT TO CHARGE UNLAWFUL RENT. LAWFUL RENT IS WHAT THEY ARE OWED AND NOTHING MORE. IF THEY WANT OUT OF IT THEY CAN SELL THEIR APARTMENT BUILDING UNDER ELLIS ACT. You said:

Posted by Anon,
a resident of Another Palo Alto neighborhood,
on Oct 8, 2018 at 1:54 pm

Posted by mike rose, a resident of another community,

>> Anon,
>> I have to disagree.

Mike,

By a broad definition, all economic goods are "welfare". But, we are being more specific here.

>> Whatever definition of "welfare" I looked up it basically comes down to this definition:
>> "Financial support given to the people in need"
>> It would be hard to argue that rent control is not precisely that.
>> It is simply a price control scheme.

By a narrow definition, then, no, money has not directly gone to the recipient, so, no, rent control is not that kind of "welfare".

I'm not trying to defend not-well-thought-out rent control. I don't favor it. But, when markets are not being efficient, sometimes government regulation improves the market. There are thousands of such examples of successful regulation. Simple things, like requiring retailers to not lie about the weight/volume/etc of food items, gasoline, etc. Regulations make markets more efficient all the time in many ways. They can also make markets less efficient, too. Like most implementations of rent control.

>> So, calling it welfare, in my opinion, is proper.

You can call it whatever you want, but, there is a difference between handing someone money, and, regulations that affect market pricing. "Whatever."

The real question here is why have the rental markets gotten wacky, and, can anything be done about it?

Posted by Fact check...,
a resident of Rex Manor,
on Oct 8, 2018 at 3:19 pmFact check... is a registered user.

I am voting yes. This is one area where local control and responsibility is warranted. Prop 10 does NOT impose rent control anywhere. There is no reason for the state of California to create a universal blanket prohibition.

It is perfectly reasonable for a tourist-orientated community to impose rent control on an historic downtown for residents and businesses. That same town may decide to not have rent control any other place.

Another city may include rent control as part of the negotiated agreement with a specific housing development.

All of these fine-grain controls are possible with Prop 10 passing. In any case, Prop 10 is a excellent example of returning control to a local entity that knows their situation better than the politicians in Sacramento.

Posted by mike rose,
a resident of another community,
on Oct 8, 2018 at 3:38 pmmike rose is a registered user.

Anon,
with all due respect, there is a HUGE diffrence between the fact that regulation affect market pricing (which I am in total agreement with), and price controls.

In the first case, as you correctly stated, "market pricing" could be affected by regulation, but it still will be "market pricing", with the equilibrium price reflecting the effects of the regulation.
In the case of rent control, which is a price control, this "regulation" as you call it won't affect the market price because the price itself is fixed by the government.

Posted by mike rose,
a resident of another community,
on Oct 8, 2018 at 3:51 pmmike rose is a registered user.

Teddy,
Your misunderstanding lies in the fact that illegal price gouging due to the shortage of goods is by its nature TEMPORARY, caused by short lived natural disaster or war.

The role of the government to stop price gouging is most proper in that case.
Rent control laws are PERMANENT, there have no expiration date. Market rents are determined by a predictable long term supply and demand rather than temporary shortage.
More appropriate comparison should be to the price of real estate, or to the salaries of workers. Should the government put price caps on value of real estate, or should it cap salaries of professionals that are in high demand?

Posted by mike rose,
a resident of another community,
on Oct 8, 2018 at 4:09 pmmike rose is a registered user.

Fact check,
If prop 10 passes, there will always be a threat that any community at ANY TIME may impose the most radical form of rent control (either by legislature or initiative process). This will most likely occur when tenants reach majority of voters in a given community.
With such a outlook, it is very unlikely that any developer or lender would undertake such a risk. Statewide protection is very much needed in this case, to provide the developers with PREDICTABLE set of rules, BEFORE they make their investment.
It is also not true, that nothing will change when prop 10 is passed. Some rent control ordinances (Berkeley, Richmond i.e.), have build in provisions forcing new construction and single family homes under immediate rent control once prop 10 passes. This will NOT require any legislative local action at all, contrary to what the proponents of prop 10 want public to believe.
The "fine grain" controls won't happen. It is an utopian dream. So far in the cities with the tenants majority, rent controls are maxed out up to the state law limits. You can be assured they will be maxed out in the future too if the prop 10 passes (unlikely).
Look again at Santa Monica, Berkely, Richmond etc. ordinances.
For tenants activists one thing is for sure: there is NEVER enough of rent control.

Posted by LockedStock,
a resident of Greenmeadow,
on Oct 9, 2018 at 11:15 pm

How come the 99% of property owners and property managers do not accept Section 8 Housing vouchers in Palo Alto? The options/choices are extremely limited if not null for families earning low working wages. Wait lists are 5-10 years for a PAH unit - they alone cannot solve the Peninsula's housing crisis. Those that own single family rental homes refuse to rent to low wage working families or to Section 8.

Also. Why do property owners and property management companies outside of PAH require proof of 3 months of pay and proof of 3 times income to the asking rent ratio? There is a massive discriminatory rental environment here.

If any of you know any 2b/2b single family rental home in a Palo Alto available and welcoming to Section 8 families. Contact me.

Posted by rent control rationale,
a resident of College Terrace,
on Oct 10, 2018 at 12:27 am

Economists do support price capping to reduce the power of monopolies, which you could say we have. When you have housing supply constrained because of "collusion" between City Council and homeowners who do not want to build additional housing, it is renters who bear the brunt. We could allow for far more housing stock on the land here than we currently do, and if you look at the Peninsula, cities without any rent control aren't building any more housing than cities with rent control. Price controls on rents are an economist's answer to these anti-competitive, monopolistic practices of constraining housing supply by City Councils who are primarily supported by homeowners and landlords. Who has more power? Landlords or renters? The outcome of Prop 10 will reveal the answer.

Posted by mike rose,
a resident of another community,
on Oct 10, 2018 at 7:17 ammike rose is a registered user.

LockedStock,
Why do you feel entitled to someone elses property by dictating them to whom should they rent, for how much and for how long?
Owners take a tremendous risk by letting a stranger into their property, and it is very understandable that they want to protect themselves by all these checks and requirements.
Income equaling 3x rent and 3 months pay stubs are pretty standard requirements, even when qualifying for mortgage. Nothing outrageous here.
VOTE NO ON PROP 10 !!!!!

Posted by mike rose,
a resident of another community,
on Oct 10, 2018 at 7:32 ammike rose is a registered user.

rentcontrolrationale,
Owners of rental properties throuoght the state are NOT a monopoly. There are thousands of individuals and families who run their own rental business independent of each other.
The radical tenant's activists like the public to believe that there is colussion and conspiracy, but this is not the case and has never been proven. What it is, it is simply a result of supply and demand imbalance, which is NOT a result of landlords conspiracy, but excessive government regulations.
Look at other states and countries.
Why the rents are reasonable there, no talk of "collusion or conspiracy"? (still utilities regulated there). Different breed of landlords? Less greedy?
Of course not.
In less regulated states market achieved equilibrium and rents are affordable.
I WILL VOTE NO ON GOVERNMENT REGULATIONS OF SINGLE FAMILY HOMES !!!!
I WILL VOTE NO ON PROP 10 !!!!!!

Posted by LockedStock,
a resident of Greenmeadow,
on Oct 10, 2018 at 9:58 am

All over the Bay Area moderate income bearing families are one paycheck away from personal economic disaster - look at the stats. The odds are always in favor of those who have and you know, the rest of us. The odds now in favor of the 2% are simply not sustainable. Regardless of the gnawing choice: food or housing. Kicking this problem to forced answers like Fresno, Redding etc you say? Why doesn't FB, Google, Amazon, Apple move there too? That would be economic boon for housing/job work/family balance. Plenty of land for massive business parks and housing developments.

BTW Typhus breaks out in the homeless camps of LA! Just the beginning.

Posted by Anon,
a resident of Another Palo Alto neighborhood,
on Oct 10, 2018 at 10:47 am

Posted by LockedStock, a resident of Greenmeadow,

>> Fresno, Redding etc you say? Why doesn't FB, Google, Amazon, Apple move there too? That would be economic boon for housing/job work/family balance. Plenty of land for massive business parks and housing developments.

More or less agree, but, I would suggest a variation: rather than consume agricultural land in the flats of the Central Valley, why not build some new towns south along I-5 uphill from the California Aquaduct? There is a lot of dry, marginal ranching land that is low productivity. Instead of adding millions of jobs/population in Santa Clara County, why not along I-5 South?

Posted by Palo Alto,
a resident of Another Mountain View Neighborhood,
on Oct 10, 2018 at 2:27 pm

@bettyjo,

Prop. 10 does NOT prevent Palo Alto from enacting rent control.

The city council, and I believe a majority of people in Palo Alto, mostly home owners, oppose rent control.

What Prop.10 would do, should rent control be passed in Palo Alto, it will reduce rentals in the city as many people who rent out extra space in their house, or decide to relocate to a different area for work and decide to rent out their condo, etc, would no longer do this because of the regulations that will now be put on the homeowner. It will be a nightmare for them should they decide to remove a bad renter, or to sell the place.

I am voting No on Prop. 10
This will make the housing situation worse, not better.

Posted by mike rose,
a resident of another community,
on Oct 10, 2018 at 5:57 pmmike rose is a registered user.

Bettyjo,

Letting the cities manage the housing problems would ba a unmitigated disaster.

There is a reason why state laws supercede local laws. The state population needs that protection, particularly from rouge municipalities, as irresponsible local laws often affect the whole state.

I give you example of a city up the river which ok's dumping pollutants into the river.
They are not being affected, but every city downstream is.
State law is needed to protect everyone.
The same case with repealing Costa Hawkins (Prop 10).

Rent controlled cities are waiting with bated breath to stick it to the landlords.
No city will be safe then, as the extreme forms of rent control could be passed at any time in any municipality.
That will make developers and lenders think twice about investing in ANY CITY in the State.
The net result will be lack of much needed new housing with possibly strangling effect on California economy.
THIS IS WHAT COSTA HAWKINS IS PREVENTING NOW.
I WILL VOTE NO FOR PROP 10 !!!!!

Posted by mauricio,
a resident of Embarcadero Oaks/Leland,
on Oct 11, 2018 at 5:59 ammauricio is a registered user.

If Google, FB and other companies refuse to relocate to the I-5 corridor, for example, why do they expect Bay Area communities to solve the housing problems of the workers they keep hiring, the housing problems they are creating?

Posted by Anon,
a resident of Another Palo Alto neighborhood,
on Oct 11, 2018 at 9:27 am

Posted by mauricio, a resident of Embarcadero Oaks/Leland,

>> If Google, FB and other companies refuse to relocate to the I-5 corridor, for example, why do they expect Bay Area communities to solve the housing problems of the workers they keep hiring, the housing problems they are creating?

Good questions. Another thing people forget is the existence of the ACE train, which provides commute-time service to the Central Valley. Apparently, some people are quite willing to commute from there for the sake of affordable housing. Here is the ACE map/schedule:

I knew one person who commuted via ACE, and, I've known several people who commuted from the area over the years. Pleasanton to Great America is 40 minutes, Tracy to Great America 1:22. If I lived over there, for sure I would take ACE rather than the brutal commute via 205/580/680.

Posted by LockedStock,
a resident of Greenmeadow,
on Oct 11, 2018 at 12:34 pm

Palo Altans are fine with shoving poor people to the confines of near delapitated tiny apartments on the edges of Alma and to the tiernany of slum lording. No parking, no pets, no covered bike lock-ups, no extra storage for anything. If you're lucky one might get a Clipper Card that can only be used for local bus transit - North and South. Too, everyone seems fine with the thousands of names that languish hopelessly on illusionary “wait lists" for housing. I find the ADU argument weak. ADU's are not the solution to Palo Alto's housing shortage even with “relaxed" rules for building an in-law dwelling. People do not want to share thier private property period. Fear mongering on the backs of those who only own one home in this town is waste of needed energy for viable and real housing for 60% AMI. Let's just confront the elephant in the room. Palo Alto does not want any more poor people here and is weary of those already residents. I believe Fair Housing rules do not use income as a criteria for discrimination safe guards: Sex, religion, race and family size are all. Economics should be added. Those opposed to prop 10 feel livery much like the same in favor of the catastrophic Prop 13 voters. “What's mine is mine and what's ours (schools, roads ...) is mine too" mentality. renters around the Bay at all income levels are being held hostage to a tidal wave of tech money rolling through here and the water is only rising.

Posted by Landlords,
a resident of Menlo Park: Downtown,
on Oct 11, 2018 at 3:50 pm

Definition

Greedy landlords: owners that have stable costs on their property, and yet raise rents 10-20% annually.

These are people paying rents. Rental housing is not (usually) a luxury good. It's more like medical care. You have to have it, but raising the price doesn't give you better quality care, and it's difficult to find another provider or rental, and the costs to move are excessive, so the tenant is somewhat trapped. Incomes tend to go up 3% a year and can't absorb 10% increases. It's gouging when there's no where else to move. Reasonable landlords will keep their tenants for a LONG TIME.

Landlords hurt people when they do this, not big businesses.

Not my problem, you say? Well, too bad. It is. This city and county is our community. Do unto others as you would have them do unto you. Be thy brother. Give Karma, expect Karma.

Posted by mike rose,
a resident of another community,
on Oct 11, 2018 at 5:12 pmmike rose is a registered user.

Landlords,
You will be surprised, but I agree with you to a certain extent.
CAA (Apartment Association) approached the tenants organizations before prop 10 was put on the ballot, and offered statewide annual rent increase cap ( something reasonable, not 0.6% of CPI nor 10-20% annually), something the both sides could live with, a compromise. The tenants organizations refused. They thought they have prop 10 bagged. Now the polls suggest not.
In my humble opinion the solution to this whole rent thing is relatively easy, sit down, hammer out some formula for rent increases that everyone can live with.
But tenants want nothing or all. Well it looks like they will get nothing.

Posted by Elephant in the room,
a resident of Crescent Park,
on Oct 11, 2018 at 5:42 pm

Funny no one mentions the elephant in the room, the takeover of the housing market by foreign billionaires.
I have been watching the listings of homes sold for many weeks and 99.99% of sales are to Asians. For millions and millions of dollars each.

This influx of huge amounts of money and profiteering reduces the market for people with normal and high incomes. Building more simply gives those investors more property to buy.

Posted by mike rose,
a resident of another community,
on Oct 11, 2018 at 5:51 pmmike rose is a registered user.

Elephant in the room,
Do you in fact know these are foreign billioners?
I hope you do, because if you just go by asian names as buyers, they are likely US citizens or residents, working class, saving every penny to buy in a nice neigborhood to provide american dream life for their families.

Posted by @Landlords,
a resident of another community,
on Oct 11, 2018 at 5:56 pm

The problem with your logic is that it is private money that buys these apartment buildings, manages the building and runs the business. What is going on now is that you are penalizing these very business owners and they will just invest in other businesses. Many apartments in rent control cities have been, are in the process of being torn down and new ownership housing is being built.

You say it should not be so expensive to rent apartments here? how about no more apartments for anybody to rent out, then where will people live who can not afford to buy here.

Posted by mvresident2003,
a resident of Monta Loma,
on Oct 11, 2018 at 7:00 pmmvresident2003 is a registered user.

The other issue no one has mentioned is what about when the market crashes and landlords still have their fixed mortgage to cover? Will the tenants organizations step up and help cover any losses for the landlords?

Short story writers wanted!
The 33rd Annual Palo Alto Weekly Short Story Contest is now accepting entries for Adult, Young Adult (15-17) and Teen (12-14) categories. Send us your short story (2,500 words or less) and entry form by March 29. First, Second and Third Place prizes awarded in each category.